India's short-term outlook cloudy: PM

The short-term outlook for Indian economy looks “cloudy” in the face of the global financial meltdown and steps are required to prevent the credit crunch from turning into a crisis of confidence, Prime Minister Manmohan Singh said today.“The short-term outlook is cloudy, but I am confident that the Indian economy has the resilience to sustain its growth momentum in the medium term... We have to prevent the liquidity crisis from becoming a crisis of confidence in the international monetary and financial system,” he said. Singh was addressing a gathering of top Indian and Japanese business leaders here on the second day of his three-day official visit to Japan.India has unleashed a host of measures, including a cut in key rates by its central bank, to increase credit flow in and the government has also announced that more steps would be taken to stimulate the economy, which is expected to post near-8-per-cent growth despite the global slowdown. The prime minister said the “great turbulence in the world economy” had “choked credit flows” and predictably spilled over to the stock market — which has been testing over two-year lows. Singh, an eminent economist himself, said that the global nature of the crisis calls for a coordinated global response. “Developing economies like India are affected by the crisis and have to be part of the solution.” “We hope to build on India’s many strengths as an emerging market economy that is now ready for rapid growth. Over the past four years, we have averaged 9 per cent GDP growth per year. “It (economy) will slow down in the current year because of conditions in the global economy. Once normalcy returns, we can regain the 9 per cent trajectory,” Singh said confidently, assuring foreign investors about the stability of India.Even the most pessimistic estimates have placed the growth rate at not less than 7 per cent. Measures taken by the Reserve Bank of India (RBI) and the government this month are aimed at kickstarting industrial activity, which would feed economic growth. “The fundamentals of our economy have been and continue to be strong. Our banking system is well capitalised. However, we have experienced a shrinking of liquidity to ensure that the rhythm of economic activity is not disrupted,” he said.“The RBI stands ready to respond swiftly to address the needs of the economy,” the prime minister said.He also pointed out to the guests that India had a tradition of a high rate of savings (up to 3 per cent) like most Asian countries and a dynamic private sector.“As we work to put India on a higher growth path with greater inclusiveness, India and Japan can cooperate in many ways,” he said. Describing Japan as the “economic and technological powerhouse of the world,” Singh noted that both nations were located in Asia to which the 21st century undoubtedly belongs.“Both of us have the wherewithal to become the magnate of growth in Asia and globally. India and Japan can cooperate in the coming period of global slowdown to devise counter-cyclical strategies to create a new zone of growth in the world,” the prime minister said.